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Month: May 2016

Many industries are buzzing about using blockchain technology – so what is this buzz all about and what is it exactly?

In a nutshell, blockchain is a way of recording data and also the foundation for cryptocurrencies such as Bitcoin. This innovative form of technology is made up of blocks of transactions (think of it like strands of DNA being joined together), and are added in chronological order.

The blockchain stores a wealth of information such as addresses and account balances from the genesis block (the first transaction), this is then added to the most recently completed block.

The blockchain acts as a public ledger which means that is simple to query any block explorer (details information about Bitcoin blocks, addresses, and transactions e.g. Blockchain Info) . The beauty of this is that you can view your own wallet address and view your bitcoin transactions.

Besides cryptocurrency, blockchain can also be used as a registry based system and can record, monitor, track, and transact an array of assets.

A good of way of thinking of how the blockchain functions is to see it as a giant Excel spreadsheet that can be used as an accounting system for transactions on a global scale. This can include a variety of areas such as finance, physical property, votes, health data, the possibilities are literally endless!

In addition, what is even more exciting about the “Internet of Value” as it has been dubbed, blockchain tech will further the value of the Internet of Things (IoT). Connected devices in the home and across various industries could automatically pay for the energy they use by writing to the relevant blockchain, creating a transfer of value based on the precise usage of the device (as mentioned by Forbes’ Bernard Marr)

So how does trust come into play with blockchain? Users can trust the blockchain from the public ledger which is stored on decentralized nodes and maintained by miner-accountants, meaning there is no need to have a third party such as a bank. In essence, the blockchain allows the decentralization of all transactions on a global level.

Companies such as Lloyd’s have been open to adapt to new technologies such as blockchain. Their director of operations, Shirine Khoury-Haq, (who mentioned in a recent CoinDesk article) that : “blockchain has the potential to improve the way insurers record risk, increasing the speed, accuracy and transparency of our processes.”

Lloyds have recently has taken on the responsibility of underwriting blockchain insurance startup SafeShare – “The insurance solution for the sharing economy” as quoted from their homepage.

So how was trust made? Trust was made directly from the blockchain and not directly with SafeShare itself to enter the business relationship. All Lloyds had to do was to approve SafeShare’s ledger, there was no need to study in detail their daily operations. The reason behind this is is that blockchain technology adds transparency by having a distributed ledger in place, therefore, it’s really hard for business to hide any dubious activities.

Trust and transparency are made in an instant, and this innovative form of technology has only just scratched the surface. It isn’t surprising that banks such as Lloyds are getting so excited about blockchain technology, even if the benefits for now seem quite distant. If we look at Cryptocurrencies for example, such as Bitcoin, which might be seen as innovative (depending on your point of view on the cryptocurrency), however, the innovation doesn’t come from the digital coin itself, it’s the trust machine that mints them.

From previous looking at Nordic Fintech I have now turned my attention to the Fintech scene in the East.

Starting with China and the most dominate fintech country in Asia, it seems that a lot in the fintech world have forgot how powerful The Red Dragon actually is. The main players in Chinese fintech include : Alibaba, Ping An Bank, and WeChat, and these guys are way ahead of the West.

If we look at Alibaba’s Alipay and WeChat for example, neither started as a big fintech player or as bank disrupter. In an article published by BANKNXT’s Jessica Ellerm, after both companies mobilised millions of users through their respective platforms, they realised continued growth could be found by moving laterally into other markets, such as banking.

The beauty of such fintech products that the likes of WeChat provide is that it delivers a financial integration experience into a user’s life, from allowing for P2P payments, bank transfers and wealth management mixed with food delivery orders, taxi bookings and mobile phone top-ups. All from a quick swipe.

When I previously said companies such as WeChat are way ahead of the West from that example alone clearly shows it – there hasn’t been a western company that I can think of that has such a streamlined app integration with financial products and other amenity app services.

This could be where the likes of Paypal are going wrong (and need to play catch up). In addition, this multi-integration is ideal for Chinese users since nowadays they seem to skip plastic and go straight to their mobile wallets.

Another key factor that sticks out in China is online scoring. This type of behaviour monitoring system takes into account a person’s social media and e-commerce activities and churns out a relevant score.

Since January last year, Alibaba’s Ant Financial Services announced a new credit-scoring system that uses information from various Alibaba services like Taobao to determine someone’s credit-worthiness.

The new service which is called Sesame Credit is an example of how far Alibaba has started to dominate the Chinese online ecosystem. Sesame Credit looks at the over 300 million registered users on Alibaba platforms such as Taobao and tracks their payment history from Alipay and other financial services to create a credit score (yes it does sound like something out of 1984!).

Alibaba/Ant Financial make it dominant player in Chinese fintech – its latest round of fundraising gives it a roughly $60 billion valuation after it was previously valued at about $45 billion last year (as mentioned in WSJ)

In addition, Ant Financial is gearing up for a future IPO (WSJ, April 2016. The company hasn’t revealed any future dates, however, they have mentioned in the press that there are plans in the pipeline to list shares on both a the Chinese Stock Exchange and overseas. It is expected that Ant Financial’s domestic IPO to come first, possibly in 2017.

Fintech East : Singapore

From Beijing to now focusing on Singapore. The Asian country is ranked the 4th largest financial centre in the world and was ranked 1st in the World Economic Forum Global Information Technology Report 2015. As Markus Gnirck and Gerben Visser mention in The Fintech Book in the “Singapore, The Fintech Hub for Southeast Asia” chapter : “The confluence of financial maturity and technological readiness is critical fir the acceleration of the Fintech industry, and naturally points to Singapore as a Fintech Hub.”

So who are the main companies in Singapore that are championing fintech?

M-DAQ – M-DAQ – “World Without Currency Borders” as their homepage states. In a nutshell, M-DAQ lets investors trade in any foreign currency denominated into the local currency of their portfolio without having to worry about exchange rates.

Numoni – Another exciting fintech, Numoni‘s goal is to provide financial services for the 2.4 billion people across the world who survive on less than US$2 per day. Numoni target the “unbanked” are their standout product is an ATM machine called Nugen. Since it was founded back in 2012, Numoni has expanded from Singapore to other Asian countries such as Malaysia, Indonesia, the Philippines, and Hong Kong. Last August the Singapore start-up raised a series B round of US$4.76 million.

Tradehero – Tradehero – Tech in Asia dubbed them as “one of the best start-ups in Singapore”. So how does Tradehero work? The app allows users to trade virtual money, betting on real-world stock exchange and commodity data. Tradehero is ideal for inexperienced investors who want to learn the tricks of the trade without taking many risks.

There are plenty more fintechs in the Southeastern Asian country and more up and coming companies will will undoubtedly soar as they continue to drive innovative forward and seek to make fintech solutions more efficient and user friendly for consumers.

Fintech East : South Korea

From China via Singapore to now ending today’s fintech trip in South Korea.

Just like many Scandinavian countries that plan to go cashless (as mentioned in my previous blog post). South Korea also has the same aim.

Only about 20 per cent of all payments here are made with cash – among the lowest in the world – according to the Bank of Korea (BOK). (The Strait Times, March 2016).

The Bank of Korea is now aiming for the country to go cashless by 2020, beginning with plans to reduce the production of coins and is cutting back on issuing paper money.

So how will a cashless society work in South Korea? Currently, a system is being tested for retailers who receive cash to give back change in credit form in a customer’s T-money card or credit card.

If you’ve never heard of T-money before, back 2004 the country introduced a smart card for public transport payments. T-money is a stored-value card with a smart chip for fare deductions and by the end of 2014, T-money was used in 43 million transactions daily in South Korea.

Although this innovative payment has been popular in South Korea it has had its criticisms, for example, some have mentioned that the elderly will struggle to adapt to using cashless payments. Moreover, some are concerned about credit card security and overspending.

Dr Sohn Sang Ho, senior research fellow at the Korea Institute of Finance, told The Strait Times that the Bank of Korea’s plan to go cashless by 2020 is “too ambitious”. He said there is still a big group of older people who rely mainly on cash transactions, especially in traditional markets, and it will take a long time for them to convert to electronic payments.

Sang’s view is that a cashless society is a long term goal, however, it is not possible in the near future.

Fintech East : Conclusion

In conclusion, the Asian fintech scene is completely different to Europe, as both continents face different regulators and challenges. However, there are some similarities that both the East and West share. For example, The digital revolution has helped break down barriers between countries, and also between industries. In addition, international commerce has helped international payments and has helped an array of start-ups drive innovation forward by creating products that have meant sending payments without fees and sent instantaneously. China has shown just how fast paced Asia has become when it comes to making fintech products and have got it spot on with creating one app services where multiple payments take place, something that the West need to improve on. Although the Asian fintech scene is clearly flourishing, it still isn’t perfect, it still needs a lot more regulations in place.